Page 10 - AsiaElec Week 05

AsiaElec REFORMS AsiaElec
Indian gas pricing reform to spur investment
INDIA
INDIA’S drive to increase domestic consump- tion of natural gas has seen the government pledge to reform pricing as well as expand the country’s pipeline network.
In unveiling the government’s nancial year 2020-2021 budget on February 1, Indian Finance Minister Nirmala Sithraman said: “To deepen the gas market in India further reforms will be undertaken to facilitate transparent price discov- eryandeaseoftransactions.”
Domestic gas developers, in both the state and private sector, have long complained that India’s current pricing system does not re ect market realities.
NewDelhisetsdomesticgaspriceseverysix months using the weighted average price of gas in hubs in the US, Canada, the UK and Russia. Prices are also set at a three-month lag to prevail- ing market rates in those four hubs.
Indian producers, however, argue that local prices should be higher than that found on inter- national hubs, which enjoy a surplus of gas that India does not.
While India introduced in February 2019 pricing and marketing freedom for all new gas discoveries whose field development plans (FDP) were still to be approved, developers want already producing elds to enjoy the same freedoms.
State-run Oil and Natural Gas Corp.’s (ONGC) chairman and managing director, Shashi Shanker, told local media recently that the company had lost INR51bn ($713mn) between 2017-2018 and 2018-2019 owing to low gas prices.
India wants to drive up gas’ share of the pri- mary energy mix to tackle chronic levels of urban air pollution and intends for the cleaner-burning fuel to account for 15% of the country’s energy basket by 2030 compared with slightly more than 6% at present.
In order to facilitate this uptick, Sithraman also unveiled plans to expand the country’s gas pipeline grid from 16,200km at present to 27,000km, though no timeline was given. Add- ing new infrastructure will also help companies monetise domestic gas elds – both conventional and unconventional – that have been viewed as unpro table.
Essar Exploration & Production’s CFO and head of strategy, Pankaj Kalra, told the Economic Times: “As conventional hydrocarbon resources are dwindling and new resource accretions are few and far between, unconventional hydrocar- bons, like [coal-bed methane] CBM and shale gas,willassumegreatersigni cance.”
He added: “ e gas grid expansion, coupled with the liberal policies introduced over the last few years, will revive investor con dence in the upstream sector.”
e Indian government will be hoping that proves true, given that its latest upstream bid rounds have failed to elicit much investor inter- est from companies not already active on the ground.
India launched its Open Acreage Licensing Policy (OALP) in June 2017 as part of the broader Hydrocarbon Exploration and Licensing Policy (HELP), which replaced the New Exploration Licensing Policy (NELP). OALP allows com- panies to propose boundaries of blocks they are interested in bidding for a er having evaluated India’s National Data Repository (NDR).
Each of the government’s four rounds under OALP, however, have been dominated by Indian companies, with Vedanta, state-run Oil India Ltd (OIL) and ONGC snapping up the lion’s share of the 94 blocks o ered.
The country has just launched its fifth OALP bid round (OALP-V), adopting even more attractive rules that were introduce in OALP-IV.™
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w w w. N E W S B A S E . c o m Week 05 05•February•2020